Doctor's Assocs., Inc. v. Searl

• Decision Date: 06 February 2018
• Docket Number: AC 38482
• Citation: 180 A.3d 996,179 Conn.App. 577
• Court: Connecticut Court of Appeals
• Parties: DOCTOR'S ASSOCIATES, INC. v. Susan E. SEARL et al.

179 Conn.App. 577

180 A.3d 996

DOCTOR'S ASSOCIATES, INC.

v.Susan E. SEARL et al.

AC 38482

Appellate Court of Connecticut.

Argued October 23, 2017

Officially released February 6, 2018

Scott T. Garosshen, with whom were Karen L. Dowd and, on the brief, Kimberly A. Knox, for the appellants (defendants).

Frank J. Mottola III, for the appellee (plaintiff).

Alvord, Sheldon and Bishop, Js.

BISHOP, J.

The defendants, Susan E. Searl and Randy A. Searl, doing business as Subway store number 34648,¹ appeal from the judgment of the trial court, effectively dismissing their motion to vacate an arbitration award for lack of subject matter jurisdiction and granting the application of the plaintiff, Doctor's Associates, Inc., to confirm that award. On appeal, the defendants claim that the court should have applied federal law, or alternatively New York law, instead of Connecticut law, in determining whether they timely filed their motion to vacate. We conclude that the court should have applied federal law in determining the timeliness of the defendants' motion to vacate and, accordingly, reverse the judgment of the trial court and remand the case for further proceedings.²

The following facts and procedural history are relevant to this appeal. The defendants owned and operated three Subway restaurant franchises under separate franchise agreements. Only one of the defendants' stores, store number 34648 (store), and the franchise agreement for that store (franchise agreement), are at issue in this case. In October, 2013, the plaintiff notified the defendants that they were noncompliant with certain requirements of the franchise agreement regarding their operation of the store. In February, 2014, the parties entered into a probationary agreement, which provided that if the defendants were compliant with the franchise agreement for three months, they would be reinstated as franchisees of the store.

On April 3, 2014, the plaintiff filed a demand for arbitration with the American Dispute Resolution Center (center), claiming that the defendants had breached the franchise and probationary agreements. The defendants received notice of the plaintiff's initiation of the arbitration proceeding even though the mailing address on the notice was incorrect. On May 1, 2014, Susan Searl contacted the plaintiff to discuss the arbitration and spoke to Jill Fernandez, a case manager in the plaintiff's office. Fernandez explained that the defendants "would be receiving further information regarding the arbitration process, the selection of an arbitrator, and the scheduling of a hearing date," and that they should "expect to receive further documentation in June or July [2014]." Fernandez also explained that the defendants "did not need to make any further decisions or take any further actions until [they] received the information regarding the process for selecting an arbitrator."

On June 20, 2014, the arbitrator found in favor of the plaintiff and issued an award in its favor. The defendants received notice of the award "as early as June 26, 2014, and no later than July 1, 2014." Along with the notice of the award, the defendants received, for the first time , notice regarding the selection of an arbitrator and the deadline for the submission of evidence in the arbitration proceeding. A representative from the center informed Susan Searl that the reason the defendants had not received any communications from the center between April and June, 2014, was that "the plaintiff [had] provided the [center] with the wrong address." (Emphasis added.) On June 26, 2014, a representative of the plaintiff informed the defendants that, in light of the arbitrator's award, there was nothing they could do "other than sell or close [the store]."

The plaintiff filed an application to confirm the arbitration award in the Superior Court on August 8, 2014.

On September 4, 2014, the defendants, representing themselves, filed a pleading entitled "Objection to Confirmation Award."³ This pleading explained that the defendants had never received notice of the arbitration hearing date and included numerous notes detailing arguments the defendants would have made had they been given the opportunity to present their case to the arbitrator. On October 3, 2014, the defendants, having retained counsel, filed an "Answer and Affirmative Defenses" in response to the plaintiff's application to confirm the arbitration award. In that pleading, which the parties treated as a motion to vacate the award, the defendants similarly alleged that they had not received notice of the arbitration proceeding, had not had an opportunity to present evidence, and did not learn that the arbitration hearing had taken place until after the arbitrator had issued the award in favor of the plaintiff.

On October 9, 2014, the plaintiff filed a motion to dismiss the "Objection to Confirmation Award" and the "Answer and Affirmative Defenses," arguing that the court lacked subject matter jurisdiction because the filings had not been made within the thirty day time period for moving to vacate an arbitration award provided by General Statutes § 52–420(b).⁴ The defendants responded that the Federal Arbitration Act (act), 9 U.S.C. § 1 et seq., governed the enforcement of the arbitration award and that their objection to the arbitration award was sufficiently asserted within the three month time period following the issuance of the award prescribed by the act.⁵ Alternatively, the defendants argued that, if federal law did not apply, the court should apply New York law.⁶ Additionally, the defendants maintained that they "had meritorious defenses to the plaintiff's demand for arbitration, but they were not given notice or an opportunity to be heard."

On September 15, 2015, the trial court issued a memorandum of decision in which it (1) denied the plaintiff's motion to dismiss, (2) refused to consider the defendants' special defense seeking to vacate the arbitration award on the ground that it was untimely, and (3) granted the plaintiff's application to confirm the arbitration award. The court concluded that the act was not controlling in the present case because the general choice of law provision in the parties' franchise agreement established that Connecticut law governed. The court also rejected the defendants' alternative argument that New York law should apply. Instead, the court applied Connecticut law. Reasoning that the defendants did not move to vacate the arbitration award within thirty days of their receipt of the award, as Connecticut law requires; see footnote 4 of this opinion; the court concluded that the defendants' motion was untimely, and thus it granted the plaintiff's application to confirm the arbitration award. This appeal followed.

The defendants claim that the arbitration award in favor of the plaintiff is unenforceable because they did not receive adequate notice of the arbitration proceeding. The defendants assert that, without notice of the proceeding, the arbitration award is not enforceable against them. The defendants maintain that because the parties expressly agreed that the act "preempts any state law restrictions ... on the enforcement of the arbitration clause in [the franchise agreement]," the court should have applied federal law or, alternatively, New York law, when determining whether the defendants timely filed their motion to vacate. In response, the plaintiff argues that the franchise agreement's general choice of law clause clearly requires application of Connecticut law. We agree with the defendants and conclude that the court should have applied federal law.

"We review a [trial] court's decision to confirm or vacate an arbitration award de novo on questions of law and for clear error on findings of fact." National Football League Management Council v. National Football League Players Assn. , 820 F.3d 527, 536 (2d Cir. 2016) ; see also Henry v. Imbruce , 178 Conn.App. 820, 828, 177 A.3d 1168 (2017) (same). "Although ordinarily the question of contract interpretation, being a question of the parties' intent, is a question of fact ... [w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law. ...

"In accordance with this principle, our recent cases have held, in a number of different contexts, that the contract language at issue was so definitive as to make the interpretation of that language a question of law subject to plenary review by this court." (Citations omitted; internal quotation marks omitted.) Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P. , 252 Conn. 479, 495, 746 A.2d 1277 (2000). In our view, the terms of the franchise agreement are clear and unambiguous; therefore, interpretation of this contract presents a question of law subject to plenary review. See JSA Financial Corp. v. Quality Kitchen Corp. of Delaware , 113 Conn.App. 52, 59, 964 A.2d 584 (2009).

"The individual clauses of a contract ... cannot be construed by taking them out of context and giving them an interpretation apart from the contract of which they are a part. ... A contract should be construed so as to give full meaning and effect to all of its provisions .... [T]he language of the choice of law portion of the parties' agreement cannot be read in isolation, but instead must be considered in light of the language of the arbitration portion." (Citations omitted; emphasis in original; internal quotation marks omitted.) Levine v. Advest, Inc. , 244 Conn. 732, 753, 714 A.2d 649 (1998). Moreover, it is a well established principle of contract interpretation that "the particular language of a contract must prevail over the general." (Internal quotation marks omitted.) Israel v. State Farm Mutual Automobile Ins. Co. , 259 Conn. 503, 511, 789 A.2d 974 (2002).

Furthermore, "[a]ll parties in an arbitration proceeding are entitled to notice and an opportunity to be heard. ... Parties must be allowed to present...